5 STEPS TO Identifying Your Profitable Target Audience PUBLISHED BY

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1 5 STEPS TO Identifying Your Profitable Target Audience PUBLISHED BY

2 You know that profiling your target audience is the best business practice... BUT WHY? Even children try to identify the right audience to approach for a desired outcome, whether it s asking soft-hearted Dad for permission to play outside for an extra 15 minutes, or asking Mum for a second piece of cake you market yourself, or your argument, to the family member most likely to say yes! In business, it s no different, just on a grander scale. Your goal is to get as many people as possible to say yes, but the more people you market to, the more time, money and resources it takes you know not everyone is going to buy, so why waste budget trying to convince them? Identifying your target audience is about focusing your sales and marketing investment on people who want to talk to you, and are likely to purchase from your company, providing a positive return on your time, money and resource investment. In short, selecting a target audience helps boost profits. In this ebook we outline how to identify your target audience: STEP 1 Consult your business plan STEP 2 Understand your Customer Lifetime Value (CLV) STEP 3 Research STEP 4 Develop a customer profile STEP 5 Find out where your audience spends time Follow these steps and use existing customer data effectively to maximize your lead generation programs, and most importantly, your sales success. 2

3 STEP 1 - Consult Your Business Plan

4 STEP 1 - Consult Your Business Plan The first step in identifying your target market is to analyse your own company; what products or services you offer and whether you re restricted by location, time zones, competitive pressures, and so on. This might seem odd, but consider your industry as an example. If you sell something that is time-sensitive, your geographic reach might be impacted. You may have a global product, but if it requires 24 hour support, you need to consider the resources required to provide continuous service. If you don t have the bandwidth, you ll need to restrict your geographic focus to something that is manageable. Plus, it is important to understand how you differ from your competitors, and what makes you stand out! What attracts customers to you over your competitors? For example, Virgin Atlantic have a young, hip brand and are likely to attract the year old transatlantic flyers, whereas British Airways is likely to attract an older, more sophisticated clientele. Next, consider your own business goals your sales and lead generation targets. It s possible to calculate the required size of your target market based on the goals you want to achieve. Your required audience size will have a direct impact on the criteria included within your target profile. For example, you may wish to concentrate on a local audience, but the volume of potential customers there won t support your revenue goals. Therefore, you may need to expand your geography, but at the same time consider that the response rates may reduce as a result. It is plan 4

5 important to clearly understand what you are trying to achieve, as it impacts the target market you go after. For more information on how to calculate your revenue and lead generation goals, please download our How to Use Marketing and Sales Analytics to Drive a Return on Investment ebook. Once you connect the dots between your product, your capabilities as a business to deliver on it, your revenue goals and the best methods to achieve them, you can narrow down your target audience to include only those who have a need for your product, in a suitable geographic location that gives you the size of audience you need to communicate with! 5

6 STEP 2 - Understand Your Customer Lifetime Value

7 STEP 2 - Understand Your Customer Lifetime Value To calculate CLV, you need to look at metrics such as average Cost to Acquire, average Sales Revenue and average number of Repeat Transactions over a set period. This sum is then divided by the average Cost to Acquire and Retain these customers. The key to identifying your target market is to not focus on who you would like to sell too, but instead consider who is looking for the product or service you offer! In our recent whitepaper, Who are My Profitable Customers and How Can I Find More Just Like Them, we review how many businesses simply look at revenues as an indicator of their best clients. However, these customers can often cost more to acquire, service and retain, draining your company profits. If you use only customers like that as the basis for your target audience criteria, you will soon be out of business! To be successful, you need to identify who your most profitable customers are, and not simply those who spend the most money. Identifying a profitable target audience should be driven by analysing existing customer data to understand the level of each customer s profitability. It is important to focus on transactional costs as well as retention and servicing costs of maintaining a relationship, in addition to the revenue generated. To calculate CLV, you need to look at metrics such as average Cost to Acquire, average Sales Revenue and average number of Repeat Transactions over a set period. This sum is then divided by the average Cost to Acquire and Retain these customers. This calculation will identify the segment of customers who are known to be profitable to your company and the characteristics of profitable customers and help determine the criteria for your target audience persona. 7

8 STEP 3 - Research

9 STEP 3 - Research When you have completed Step 2, you now have a segment of customers from whom to build your persona, allowing you to target those with similar characteristics. Using this data, the next step is to segment by key criteria that are important to your business. A successful persona always starts with a solid demographic base. If you are a B2C company, you may want to look at age, gender, location, income, marital status, etc. If you are a B2B company, you may look at job role, industry sector, number of employees, annual turnover and again, location if you are considering export opportunities. It is important to understand the problems your product or service solve. Once you have your demographic base, it is essential to dig deeper in their needs, motivations, and challenges. If your know your product or service answers a specific need or pain-point, you can start investigating who is likely to suffer from this problem. 9

10 Ask yourself: Who is most likely to be affected by this pain-point? What will these individuals lose if this pain-point is not addressed? Your target audience then becomes individuals in situations where the cost of not addressing the pain-point is higher than if they continued without resolution. These people will clearly understand the value of your product or service, and be open to offers from your organisation. In some cases, it may mean adapting your product, or price point to meet the requirements of the purchasing public, particularly in highly competitive environments. In all cases, however, the specific pain-points or problems your product addresses affects the way you market it. You may choose to stick with traditional direct mail to reach your target audience or a different marketing tactic such as social media either will be dictated by the preferences of your target audience. 10

11 STEP 4 - Develop a Customer Profile

12 STEP 4 - Develop a Customer Profile After completing your market research, it s time to create a customer profile. Using profile criteria from your most profitable customers, as identified by your CLV calculation, along with your research data, you should be in a position to create an in-depth description of what ideal, profitable customers look like. This is more than a brief statement based on their purchasing habits it should also contain demographic and psychographic information, including: Customer information: This should include your most profitable products and solutions and the need your offer addresses, so you can target prospects with the same profile. Demographic information: B2B organizations should include vertical sector, number of employees, turnover and more importantly geographic location, which will also be influenced by your customer and company location and available resources. B2C companies should include age, gender, location, ethnic background, marital status, income, and more. Psychographic information: This is more conceptual and may support the identification of marketing channels and tactics for B2B profiling; for example, how did existing customers find your company, what actions did they take during the sales process, what were their painpoints, etc. In contrast, B2Cs should look at the characteristics of customers, lifestyle indicators, interests, hobbies, values and even religious or political preferences. 12

13 In summary, you are looking for demographic and psychographic patterns within your existing customer data, to help you identify your typical customer, and profile them in as many relevant ways as possible. The goal is to build a picture of an ideal prospect and an understanding of how and why they would do business with your company. Once you have identified your target audience, it is also important to consider their role within the decision-making process. There are often three personas to pay attention to, including: The decision-maker the individual who provides final sign off on the purchase The influencer the individual who influences the decision-maker The evangelist often an existing customer who acts as proof that your service or product can address a need or solve a problem affecting the decision-maker. Splitting your audience into these key personas allows you to target your marketing message down to the individual level, and their role within the sales cycle. This increases the likelihood of success and profitability. 13

14 STEP 5 - Find out Where Your Audience Spends Time

15 STEP 5 - Find out Where Your Audience Spends Time When you have completed Steps 1-4, you should now have a strong profile of your ideal customers. However, it s simply not enough to know who your target audience is; you also need to know where you can find them! Historically, companies advertised in the Yellow Pages or on TV. Direct mail then became the marketing tactic of choice, before being surpassed by and telemarketing. But research by HubSpot provides compelling statistics regarding the lack of effectiveness of these traditional mediums; 86% of people skip TV ads, 91% unsubscribe from unsolicited s, 44% will not open a direct mail piece and over 200 million people are on Do Not Call preferences lists. So, where can you find your target audience? Most will be online, using Google to search for your business, or observing you on social media, maybe even while downloading another mobile app! We live in a media-driven world that no-longer restricts our communication to televisions schedules. Instead, as consumers, we expect to receive personalised product and service offers via the medium of our choice. THE OLD MARKETING PLAYBOOK IS BROKEN 86% skip TV ads 91% unsubscribe from s This myriad of choice is often the overwhelming challenge faced by marketers today. However, by analysing pre-existing data, you can select the best communication channel for your target audience. 44% of direct mail is never opened 200M on the Do Not Call list 15

16 In the same way that you used customer data to identify your ideal target market you can use customer data to understand where you can find your target audience and what they are searching for: Your customer pain-points tell you what information your target audience is searching for online to resolve those exact issues. You can use this information to create focused content, blog articles, website pages, etc. that address these problems, packing the content with keywords for search engine optimisation. Your customer data can help you identify previous marketing journeys what marketing campaigns and content customers responded to and the most effective marketing tactics. You can use this information to build a customer journey map, including how they are finding your company, and what content they digested to become qualified sales opportunities. Then, all you have to do is replicate this map to communicate with your target audience. Combining your customer profile with knowledge around how customers digest your communications facilitates the effective and efficient delivery of your marketing message. 16

17 Conclusion Even with a wealth of statistics proving that mass-marketing limits your potential for a positive return on marketing investment, many companies still struggle to identify their target audience and implement resource-draining marketing plans. The lack of target marketing is driven by a company s inability to leverage insight stored within their existing customer data. Successful targeting of profitable prospects is seated in your ability to use customer data to understand which of them generate the greatest yield and how they connected with your organisation. A CRM solution can provide you with the data analytic tools required to not only identify your most profitable customers, but also track their communications journey, and replicate your most effective and efficient marketing programs. A CRM solution allows you to organise and share sales and marketing information, track all interactions between you and your customers and prospects. This empowers you to manage and segment your client information, better identify new target audiences and to identify the best way to nurture new prospects through the sales funnel to the point of purchasing. Sadly, the work doesn t end there. It is also important to implement a CRM solution that allows you to continually review your CLV calculations and behavioural patterns to ensure your target market criteria remains current and flexible to industry trends and competitive pressures. Therefore, it is important to persistently track and analyse sales results, marketing communications, customer response and more to continually improve your marketing impact. The key lesson here is to effectively use customer data to identify new, highly profitable target markets, with big payoffs in increased ROI and company profitability. 17

18 Next Steps Hopefully, this ebook has highlighted the importance of understanding and knowing your existing customers, and using that insight to identify new, profitable prospective audiences that will deliver a positive return on marketing investment. Staying on top of changing consumer purchasing habits, knowing how to calculate CLV, and a robust CRM solution that captures and tracks customer and prospect information are the tactics and tools needed to support your data-driven analytics. To better understand how to use these tools, please access further complimentary resources, including: Additional Complimentary Resources How to calculate and use your Customer Lifetime value ebook How to use marketing and sales analytics to drive return on investment ebook Successfully engage prospects and recruit new customers practitioners guide. 18

19 Want to learn more about how to identify your most profitable customers? GIVE US A CALL, WE D LOVE TO CHAT +44 (0) CONNECT WITH US EMEA HEAD OFFICE - AMERICAS AUSTRALIA / NEW ZEALAND Maximizer Software Ltd. 2nd Floor, Apex House, London Road, Bracknell, Berkshire, RG12 2XH, UK Phone +44 (0) Website Maximizer Services Inc. 208 W. 1st Avenue, Vancouver, BC, V5Y 3T2, Canada Sales Phone Website Maximizer Software Solutions Pty. Ltd. Suite 1.14, 32 Delhi Road North Ryde, New South Wales, 2113, Australia Phone +61 (0) Website Copyright 2015 Maximizer Services Inc. All rights reserved. Maximizer CRM is a registered trademark of Maximizer Services Inc. Maximizer CRM, Maximizer CRM Live, Maximizer Contact Management, and other product names may be trademarks of their respective holders. This is for information purposes only. MAXIMIZER SOFTWARE INC. MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, IN THIS SUMMARY.

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